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tv   Mad Money  CNBC  February 28, 2013 11:00pm-12:00am EST

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> i'm jim cramer. welcome to my world. you need to get in the game. firm are going to go out of business and he's nuts! they're nuts! they know nothing! i always like to say there's a bull market somewhere. "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money," welcome to cramerica. other people want to make friends, i'm just trying to save you a little money. my job is not just to entertain you but teach and coach you. call me at 1-800-743-cnbc. so who brought us up here? after a day where the dow jones average came within 20 points of taking out its all-time high, falling in the red, s&p sinking .09. nasdaq declining. we have to ask, which companies have been the most responsible for this stupendous advance and then more importantly, perhaps, which ones could ultimately put
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us over the top that we failed to do today? i've got good news for you. good news because the chief drivers of the dow are stocks that as much as they have already gone up can, indeed, still run and run hard from these levels. first up, from the market's march 2009 bottom, which stock is most responsible for the increase? american express. do you know the stock has rallied 484% from the sad march 2009 levels or 534% return adjusted for dividends because you know we favor reinvested dividends. i'm going to make that point after each one of these. if only just to drive home the point that i need you to reinvest them. in the dark days of the great recession, american express racked up terrible bad debt losses. people were actually concerned that the iconic brand might not make it. now, i look at this fabulous well-run company, i think it still looks so cheap, 13 times earnings, this may be one of the best stocks out there for 2013. when american express last reported, the ceo announced a huge restructuring, including
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serious layoffs that could produce a sizable earnings boost. american express at $62.15 is only 85 cents off its 15-week high. this stock is well off from where its all-time high before the big fall. and i think it's a much better, more powerful company than it was at that lofty level. certainly less risk. i can easily see it taking out that price the next time it reports. second biggest contributor to the increase is caterpillar. up 286% from the bottom, 327%. while caterpillar represents the best of manufacturing, in the dark days of 2009, c.a.t. traded as a financial company, and a weak one at that. because caterpillar's clients needed financing to purchase the company's equipment and c.a.t. itself had trouble giving them credit. and boy do you ever need credit when you're selling those big machines. so orders truly suffered. now, though, we're on the other side of the moon. c.a.t.'s balance sheet is rock solid, its orders are strong. but you know what? they aren't as strong as they
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could be later this year if china keeps improving as we heard from joy global, competitor to c.a.t. i think china will get better, caterpillar could easily head back to $116 where it was last year before we heard that china weakened. the story makes a ton of sense, don't look for c.a.t. to hold the dow back at these levels. next up, frank blank's home depot. that stock's responsible for the third biggest gain in the dow, rallying nearly 276% from the bottom or 320% with the dividends. blake reinvented home depot or brought it back to its roots. in fact, we are only just now beginning to see the tailwind of the housing recovery impact home depot's earnings. the despot is boosting dividend, buying back stock like crazy. and i think it's just getting started which is why my charitable trust has such a big position in home depot. if we're only in the first inning of the housing recovery,
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as i think, building just a million homes this year when we might as well need two million, that's how -- there's a lot of demand. home depot has much more room to run. disney's the fourth biggest contributor rising 250% since the bottom or 268% with reinvested dividends. and this company has totally reinvented itself since the dark old days, profiting first from the marvel acquisition and the star wars franchise. new rides at the theme parks, big ratings for espn. tremendous faith that the next move is higher. finally there's general electric, another charitable trust holder, rallied 213% since the generational bottom or 257% with dividends. all the dow stocks i follow, this one, this one is the absolute cheapest. first, general electric traded at $16, 12 years ago. it's at $23 today. i think it's every bit of a company that traded at those levels. ge's earnings stream is more industrial and less financially oriented. and i like the fact it has
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gigantic international exposure. looking for dividend boosts and buybacks that will close the value gap between the ge of 12 years ago and the ge stock of today. it's just too cheap to stay down here much longer. it's going to help the dow. all right. now who's been keeping us back? i mean, who's been hurting the cause? and can those stocks turn themselves around and power the dow well past its all-time highs? did they keep us back? looking at the bottom five, i see some stocks that could easily give us oomph, but others that just might not cooperate. the fifth one that's pulled us down, i'm going from real bad to horrible since the generational bottom in 2009 is alcoa. that's gained only 58% from the bottom. i have no problem envisioning
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alcoa at a much higher price but it traded $18 in 2010 after the bottom, a far cry from the $47 level before the great recession. stock's at $8, wow, that's a current bottom, right, and that's what we're seeing. nevertheless, don't look for alcoa to give you any near term help unless it gets taken over. including the one that just paid top dollar for alcan not that long ago, i wouldn't hold my breath for a takedown. i don't see the earnings power to take the stock higher any time soon. it's not going to help us. fourth worst, cisco. i think cisco could be a big winner in 2013. even as the stock is acting terribly courtesy of a downbeat outlook from john chambers when it reported last. i have never in all of my years of following cisco seen this stock at such a discount to all the other stocks in the s&p 500. it's a meager ten times earnings for heaven's sake. frankly, that's ridiculous. i think this stock has the best
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chance to flip from dow lead to dow lead. third anchor on the dow, walmart, which rallied 65% with dividends. this is a tough one because the stock has moved so much lately that i regard it as overextended on a chart basis, especially after the company's squeamish outlook. like alcoa, do not look for too much near term help from walmart to power the dow through its all-time highs. second worst performer is exxon. this company's much too revered for my taste. the $400 billion behemoth, not growing reserves much at all and that's the key metric for oil. paid top dollar for a natural gas company at near all time high and offers a meager 2.5% yield. again, i don't think exxon's going to do anything to help the dow's cause to go higher. finally, the worst. can it be the first? the worst. hewlett-packard. hewlett-packard is the only stock in the dow that is actually down from the dark days four years ago when the dow
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traded more than 50% lower than where it is right now. hpq lost an astounding 21% since the dow hit the bottom in the great recession, 18% with the reinvested dividends. this is a tough one. i racked my brains on this one. talk about it all the time with david faber. you're betting here that ceo meg whitman can pretty much pull off a miracle, a wholesale reinvention of a company that has been brought down by horrendous mismanagement and horrible acquisitions before her, all stewarded by perhaps the worst board of directors in the world. but all of that said a couple of decades ago, ibm looked like a goner and it was turned around. it could happen to hewlett-packard too. i don't want to own hewlett-packard here. it's run up 40% since the year began and we're in february. here's the bottom line, we've rallied huge off the bottom as the dow attempts to scale an all-time high, and i expect the stocks that have led us from the bottom, the biggest contributors to the advance from the bottom
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will be the ones that keep us headed higher. again, think about this. let's see, a financial, a manufacturer, a retailer, an entertainment play and a diversified industrial, it just doesn't get any better than that. mario in new york, mario? >> caller: a long island boo-yah, professor cramer. >> what's shaking? >> caller: i'm a long-time viewer, first-time caller. and i really want to thank you for helping us little guys get our retirement accounts back on track in these turbulent times. >> thank you for the nice kudos. how can i help? >> caller: you're welcome. i want to talk about a stock i've been in for a year. that stock is first solar. and yesterday it got pounded on disappointed quarterly earnings and, again today was another down day for a total of about 21% down in two days. what's your advice? jump ship completely on this? dollar cost average and buy on the dip? >> i need a catalyst. we did overstay our welcome on the downside. here's the problem, first solar, that quarter was horrible.
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and the outlook was horrible and the chinese, oh, man, they're killing them. my advice -- exit stage right. "mad money" will be right back. coming up -- time for tech? has used its cloud-based offerings to generate sky-high returns for investors. but after reporting, will it come back down to earth? or could this flight continue even higher? cramer's exclusive with the ceo is next. and later, on the rise? strong earnings results caused investors to gobble up slices of dominos pizza today. add on an extra topping and you've got one piping hot stock that took out its all-time high. can it continue to deliver? don't miss cramer's exclusive with its ceo. plus, food for thought. popeye's has been one of the hottest stocks in the fast food space, but today, investors tossed its shares in the trash after reporting.
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is now the time to take a bite? cramer's speaking to its ceo, all coming up on "mad money." don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer #madtweets. send jim an e-mail to or give us a call at 1-800-743-cnbc. miss something? head to to prove to you that aleve is the better choice for him, he's agreed to give it up. that's today? [ male announcer ] we'll be with him all day as he goes back to taking tylenol. i was okay, but after lunch my knee started to hurt again. and now i've got to take more pills. ♪ yup. another pill stop. can i get my aleve back yet? ♪
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time to check in on our favorite cloud computing firm,, the software and services company that uses the cloud to helps customers organize their sales teams and allows management to figure out what's going on in their companies in real time. salesforce has been one of the strongest growth stories of the tech companies for a long time. we like growth, remember? back in november of 2008 when the market was getting crushed,'s visionary ceo and founder came on the show and told us not to worry about his company. in the years since then, hmm, 650% gain. yet over this time, the bears
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have not stopped their jeremiad against this company and its stock including jared bernstein. we know the numbers are great, it's been the fastest software company. we know that deferred revenue number, that's the best barometer of future earnings, is growing by leaps and bounds. we believe benioff when he says he will soon surpass industry giant s.a.p. as the largest customer management software company in the world. we recognize how difficult it is in these tough times to rack up an 11-cent earnings beat off a 40-cent basis on sharply higher than expected revenues, including 157-figure deals and an astounding nine eight-figure deals. plus wins with unilever and phillips, two of the largest companies in europe. the bernstein bears and their ilk keep leading us wrong. we've got to ask tough questions
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about oracle, microsoft, s.a.p., as the bears constantly insist one day this fabulous growth story must end. although, sorry, after tonight, i just don't think the prediction is even remotely in sight. how does salesforce keep succeeding? being the fastest growing tech company i follow. i always tell you to go to the website, look at the testimonials. it's not even about the technology alone. it's about the customer. so let's talk to mark benioff, hear more about the quarter and his company's future. welcome back to "mad money." >> hey, great to be with you, jim. thank you so much for having me again. >> first, congratulations. you said you could get up to that $3 billion mark. has anyone gotten to $3 billion faster than you? >> jim, we're focused on getting to $4 billion. we are all about speed, it's the most important value in business today.
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we're the $3 billion cloud computing in the world and we're going to be the first $4 billion company, that's what we're focused on now. >> i'm going to do a little different tonight. i listened to one of your presentations. okay. you gave a presentation in new york where you talked about how you want to become a customer company and you said you read everybody. you read the reporters, you read the analysts -- okay. you read the analysts reports, there's a guy from bernstein. your market is not as big as you and he says i'm going to go right to it, underperform because hosting costs, margins, large deals all worried about it. hosting costs, up, down, how do they do it? >> jim, you've got to realize we have an incredible transformation underway in our industry. and every company has to become a customer company and you just used that term, let me explain to everybody what that means. we have been talking for the last few years on your show about how the cloud, social and mobile worlds were going to change everything, and it has. but the number one thing that has changed is almost every company today has to readdress how they address their customers. we all have to become customer companies, we have to get closer
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with our customers, more intimate. we have to get deep, deep, deep relationships, and that is what is driving this business, that is what is making things go forward with us our sales product line, service product line, our marketing product line and our cloud platform. this is a transformational time, and as you mentioned, i was just in new york city and these huge new york city companies like general electric and bank of america and philips, they want to become customer companies. >> the reason i mentioned the bernstein thing, he says microsoft's coming along, oracle is coming on, you in the talk i listened to said, oracle, ibm, microsoft, they're all really good at this now. wait a second, they all weren't really good when we first started talking. >> well, you've been right on, jim. and unfortunately, that bernstein analyst you quoted and i think this is what you want me to say. over the last one or two years now, he's been dead wrong. >> thank you. >> he doesn't realize the world has changed, the world has
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transformed, the world has evolved. we have moved into a new world of computing. who is carrying around a pc? who has windows anymore? this is a new world. we all have computers in our pockets. we're on facebook, we're on twitter, things are going more dynamic than ever before. and this is an exciting new world, but it's a treacherous world. because for companies, they have to change and evolve because of these changes that are happening. and that's what we have to do. we have to be their champion and help them transform. >> i have now watched pretty much every presentation you've sent me to look at and the one thing i'm certain about, if i'm at s.a.p, at oracle, smart guy, i have now seen your game plan and i'm going to go into all your customers and say, listen, whatever he's doing, i've got the back end tool, the hardware tool. he's told you what he wants to
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do, i'm going to do it for you and do it cheaper. why can't they do that? you tell us what to do. >> why have s.a.p.'s largest customers become our largest customers? you look at a great win this quarter with philips, one of s.a.p.'s largest customers in the world. they're building a new customer network, jim. it is phenomenal. they're going to put all of their products, and i'm talking about not their consumer -- just their consumer electronics products, new lighting products, even their toothbrushes on an incredible customer network. a social network of products. it's an internet of things, it's an internet of everything, it's an internet of philips. and what is going to be the basis? what is the basis of that relationship? that new relationship with the customer for philips? and our customer platform. and that transformation that they're going to have a direct relationship with us, their customers, it's a great example. i have a lot of philips products, i love their company, but they don't have my name in any of their databases, but that's going to transform, it's going to change as they are building connected products now and an incredible new way, they need a customer platform to bring that together.
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that's not what s.a.p. or microsoft or oracle do. you know that. >> now, wait -- >> we are a customer company, we're helping our customers connect with their customers in this entirely great new way. >> here's what happened, typically talk about what are you doing for kimberly. today i'm on a conference call for a retailer and this retailer is banking its whole i.t. on oracle and they're saying only oracle can deliver this back end. if you were ron johnson at jc penney, how would you tell him that is better than oracle? >> well, i would point to him to the work that we're doing with some of the most important retailers in the world like burberry. in london, it's like minority report. they'er putting rfid tags on all of their clothes now and their shoes and handbags and when you walk in the store, it remembers you, knows you, knows everything about you and you walk in the store and the whole store changes to reflect you.
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now, you had to opt into this, agree to this. but when you pick up that handbag in the new burberry store in london, it's amazing. and you put it on this magic plate they have, the mirrors all change to show you how that handbag was made. and how it looks with all the products you've already bought from them. they are reconceptualizing how they handle their relationship with their customers. you can go to youtube and see that video, you'll see that store, you'll see all that. so if you want to see a next generation retailer, look at burberry. you want to see a consumer electronics company, look at philips. you want to see a manufacturing company, look at general electric, and who are they building those relationships with? salesforce's customer platform. >> i'm terry lundgren, listening to you tonight because i know he watches the show. he hears this.
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can he call someone and say i want that rfid? or is that just burberry and will they say what are you doing giving it to macy's? >> he can call me. i do all my own e-mail. any customer can e-mail me. go to twitter, @benioff,, i will happily go see any customer in the world and show them what i think the future is for their industry. banking, manufacturing, financial services, retailing, whatever it is, you know, let us take a look at what we can do for our customers and the reason we have this growth, jim, all over the world, and i think we're faster growing than any of the other companies you mentioned today, by the way, by maybe an order of magnitude, is because we are transforming our customers. our only job is to make these customers massively successful. >> well, look -- >> that's what gets so exciting every day. >> you say the customer's ready to fire you. i've got to tell you, these numbers were unbelievable. marc benioff, thank you for being on the show.
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>> i really appreciate it. by the way, that was sam walton who said that the customer can fire you. walmart is a new customer. >> i wish i'd known that earlier. thank you very much. great to talk to you. that's marc benioff. talk about burying the lead, walmart's the largest retailer in the world. after the break, i'll try to make you more money. coming up -- on the rise? strong earnings results caused investors to gobble up slices of dominos pizza today. add on an extra topping of a newly minted dividend and you've got one piping hot stock that just took out its all-time high. can it continue to deliver? don't miss cramer's exclusive with its ceo. revolutionizing an industry can be a tough act to follow,
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but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business. there. i said it. they don't have pictures of my kids. they don't have my yoga mat. and still, i feel at home. could it be the flat screen tv? the not so mini fridge? ♪ the different free dinner almost every weeknight? or maybe, it's all of the above.
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it's a mercedes-benz through and through. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. in an environment where everyone's fretting about higher gas prices, higher payroll taxes crushing the american consumer, you might have looked at that big-picture thesis and decided all of our quick serve plays were in trouble. subway came on cnbc and said january traffic was slow. implementation of obamacare is creating uncertainty for the future. but this is why we don't do thesis investing here on "mad money," because all too often the facts simply refuse to comply with the story. take dominos pizza, the second best performing restaurant stock over the last 12 months. maybe that means the consumer's fine or the consumer's in trouble, i don't care, but dominos is executing so well with the new deep dish pan pizzas that the company can transcend those problems.
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either way, you're better off investing based off what's happening in an individual company rather than trying to put a story together about the whole economy that you can try to shoehorn lots of stocks into. especially if you're like me and my kids as we all love dominos and order it every time we're together. no cheese, though. a four cent earnings beat off a 60-cent basis, rising 7.5% year-over-year. beyond, that the domestic same store sales increased by 4.7%, international, because dominos, by the way hugely and rapidly growing international business, rose 5.2% versus the year before. dominos instituting the very first dividend paying 20 cents a quarter, which at these levels gives a 1.6% yield. the name has been a major, major tear. the stock's given us a monster rally in excess of 360% since i first got behind it january 2010. did your paycheck make that? let's check in with patrick
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doyle, the ceo of dominos pizza, and find out whether this momentum can continue. welcome back to "mad money." >> hey, jim, how are you doing? >> i don't know. look, when i read the quarter, i said to myself, i've got to ask him. how do you top it? i mean, honestly, how do you top it? this was by far the best quarter you've ever done. how do you top it? >> yeah, you know what, i think we've really figured something out. between the technology, getting the food better, it just keeps working. and you know what, we're only selling a little over 10% of the pizzas in the u.s. there's still a lot of share for us to take. at the same time, the international side as you know, we've still got a long, long way for us to run there. we're feeling pretty good about where we are. >> okay. now, you've got the handmade pan pizza, which you point-blank say may be the most successful launch. how does it work? did you guys -- remember when you did the campaign which said, listen, our pizza's got to taste better? why didn't you do this one? someone said we ought to have this too? >> you know, pan pizza is 20% of
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the category in the u.s. and we really haven't played there. and the opportunity for us was to have a handmade pan pizza that was going to be a serious entry there and really where we got the pick-up in the fourth quarter were existing dominos customers who would go somewhere else when they felt like a pan pizza. and, you know, so these are mostly people that we already did business with, they wanted a great pan, we didn't give it to them before, now we do. and that's really what drove the growth in the fourth quarter. >> the other guys really frozen like the ad you did? or is that a straw man? is there anybody using frozen dough? >> we didn't name anybody, but, yeah, there are people out there using a frozen disk, basically, and they thaw that out and then they make the pizza on it. we're starting from a dough ball. >> why not name them on the show? they begin with, say, "p"? >> there are more than one. >> fair enough.
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i always give you ample opportunity to do that. capital allocation. how come dividend, i've asked you dividend many times, the special dividend, you buy back stock, why this time dividend? >> so you'd stop asking me about it, really. >> good point. >> that was the primary reason. no, we refinanced our debt about a year ago, and with that in place, knowing that our capital structure was set, we really started looking at it, and we made the decision, you know, the investors are clearly looking for yield, you know, this dividend is about $45 million for us on an annualized basis. our free cash flow last year was 146, still leaves us, you know, 100 million plus we can use for buybacks if that's what we choose to do. and with investors looking for yield, it just made sense for us to do this now. >> i totally agree. >> 1.6%, 1.7 yield. makes a lot of sense. >> the stock's up so much. that stock is yielding like a utility. okay.
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now. >> right. >> you talk about switching your allocation of ads from regional to national, 5.5% to 6%. i started thinking, let's not be constrained by that. what would happen if you took it up to 7%? would your sales incrementally go up that same amount? is there leverage to your ads if you took it to 8.9% it would be incredible for sales? >> you know, there's a point at which you start getting diminishing returns on that. and so, you know, we look at this constantly. we run a media mix model, pretty deep research, regression analysis. looking at the returns we're getting, incremental returns on ad spends, if you make a move bigger than that, you can't predict what the outcome is going to be, as precisely as you want. we think it was a smart thing to do. there's a place for the local ads, local coupons. but .5% move, we were comfortable it was going to be a good thing for our stores. >> have you nailed down exactly how much more business you did this super bowl versus the
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others because of the outage? >> it certainly helped if you've lengthened the game a little bit, more people are going to be around. that's first quarter. we're not going to get into that specifically, but certainly at the margin, that was a good thing, but that's one day. that's not going to have a big impact on the quarter. >> top technology brand, you say it over and over again in the conference call. what's the new technology that is working? and your app -- you're doing a tremendous amount of business with that app. >> yeah. you know what? there are great things happening there. we actually just started taking online this week. we started taking credit cards on file. so people can save a profile. we think that's another nice step forward. it makes it a little easier for people. they don't have to reenter a credit card each time. we've got a full pipeline on that front. >> we always pay by cash. when did you do that? >> yeah, we just did that this week, actually. now when you go in, if you're ordering online, mobile will come a little bit after, but if
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you're ordering online now, you can register your credit card and we've done it all so that it's all safe and secure and it'll just make it easier for people to order. lots of -- >> the kids and i are always asking why we have to do cash. you know, because i always say, listen, let's do credit, give the guy a tip and we're fine. you've fixed that? >> yeah, we fixed that. >> patrick doyle, the president and ceo of dominos pizza, congratulations on another great quarter. i cannot tell you how many people bought the stock when it was at $10 when you were first on. >> thanks, jim. >> that's patrick doyle, president and ceo of domino's pizza. why do we do the show? so we can find stocks like domino's pizza and salesforce. this is what the show is about. stay with cramer. coming up -- are you ready to get charged up? cramer cranks up the voltage and goes electric on an all new hyperactive "lightning round."
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it is time. it is time for the "lightning round" on cramer's "mad money."
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rapid-fire calls, you say whether to buy or sell. my staff prepares the graphics, play until this sound and then the "lightning round" is over. time for the "lightning round" on cramer's "mad money." arlene in california. arlene? >> caller: yeah, boo-yah, jim cramer. >> boo-yah. >> caller: you have really helped me with my portfolio, so thank you so much. >> my pleasure. >> caller: i'm calling about hain celestial. >> you know what? all this negative stuff. i'm with irwin simon. i think there's a trend toward healthy eating and i think hain is a winner not a loser and the bears -- kevin in texas, kevin? >> caller: hey, jim, boo-yah from houston. >> boo-yah back at you. >> caller: do you think american rental car will break out to a new high after the awesome quarter? >> i like american rail car. there was a push between that one and trinity. we need tank cars. >> buy, buy, buy -- >> a plethora of oil in all
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different places and not a lot of pipelines and american rail is one of the helpers of that issue. joe in new york. joe? >> caller: hi, jim. >> hey, joe. >> caller: my stock is seadrill. sdrl. i'd like your comment on the stock and the high dividend. >> i have been incorrectly saying that this one is not the right one to be in because i was worried about the yield and the yield seems to be okay. i do like the drillers, i do like national oil well varco. my charitable trust just sold schlumberger at the 70 to 72. let's go to howard in indiana. howard? >> caller: hi, jim. i want you to know i watch your show almost every night. really enjoy it. my question -- i own commonwealth reit cwh. monday it was down, tuesday it was up, wednesday it was down 13%, today it was back up 12%. can you tell me what's going on
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with this and what you would recommend i do with this reit? >> i totally defer to my friend buddy pal colleague david faber who basically on "squawk on the street" told you to buy this stock -- if you listen to him, he didn't tell you to buy it, that's my interpretation, $18, $19, it runs up, the big offering, bottom line, i don't want anything to do with it anymore. i think it's too crazed. i'm not going to venture an opinion. and that, ladies and gentlemen, is the conclusion of the "lightning round." >> the "lightning round" is sponsored by td ameritrade. but he's not. ♪ he's an architect with two kids and a mortgage. luckily, he found someone who gave him a fresh perspective on his portfolio. and with some planning and effort, hopefully bob can retire at a more appropriate age. it's not rocket science. it's just common sense. from td ameritrade.
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sometimes you need to wait for a stock to stumble in order to get a chance to buy it at a decent price. take afc enterprises, the parent company of popeye's a chain with some 1,634 domestic franchises, primarily in korea, canada, and turkey as well as 45 company-owned restaurants. do you know this is the best-performing restaurant chain over the last 12 months? up nearly 80%, rallied 15% since the beginning of the year.
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last night the company reported what some analysts thought was a disappointing quarter. today it fell off its pedestal, 5.2% after opening up nicely. what's happened here? afc preannounced back in january a much better than expected quarter. the headline numbers were good, the company delivered a one-cent earnings beat that rose 31% year-over-year. however, afc's store growth for the quarter came in at the low end of expectations and gave disappointing guidance according to these analysts for 2013 and that's what hurt the stock. i've been a fan of afc enterprises for some time now because this company has been turning itself around. if you still believe in the turnaround, then you have to view this weakness as a rare buying opportunity for a chain i do love to frequent, especially when i'm in new orleans, there's one real close to my daughter. should we still believe in the turn here? let's talk to the ceo of afc enterprises, find out about the quarter and where her company's headed. welcome back to "mad money." >> thank you for having me. it's great to see you again.
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>> okay, same. i love -- i'm looking at the scene behind you and i know it all too well. okay. you closed 75 restaurants, so are we almost done with weaning out the weak performers? or is there still more work to do with that? >> you know, jim, in the united states we only closed 2% of our restaurants, which was way below industry standards for a chain of our size in our 40-year history. the closings were primarily international where we're cleaning up markets with low-volume restaurants. we are opening restaurants that are at a very fast clip. we're in the top three restaurants in the united states building free-standing units. we're really on a roll with new unit growth in the united states. >> i'm looking at where a map of where your stores are now and i keep thinking what is the inflexion point where you can blow it out with big national ads because you're almost in every single state. >> we are blowing it out with
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big national ads. we've been on national television now since the fall of 2008. and because our sales are growing, our average unit volumes are up 20% over the last four years. that's funding a huge increase in our marketing spend so that we can tell customers about our brand, our product innovation, and have our spokesperson andy welcome them into our restaurants. now when we open a restaurant in a new city, there's pent up demand. our new restaurants are opening up at 40% higher volumes than our current restaurants, jim. >> and how about the remodeled restaurants? >> remodels are going great. we did a huge number right at the end of the year, so we're going to wait a few months here before i call out a trend on it. i'm very excited. we've got 25% of the system done. we think by the end of this year, we'll have 60% of our system remodelled in a beautiful louisiana kitchen image that really makes our food taste even more amazing than ever. >> one thing confused me. you gave what some people thought was a disappointing comp store growth. my take was not that. my take was when you do these
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big celebratory specials, when you do a crawfish special, okay. i'm surprised that you can model that at all. if you hit it out of the park, your comp store sales numbers will be much bigger. how can you even try to model one to three when you don't know what new thing you might have to drive a lot of traffic? >> you know, we did knock it out of the park last year with our comps at 6.9%, year before, 3%, so you're right, forecasting the year ahead, we want to keep going on a roll. we forecast this year would be 3% to 4% up. that means we'll be growing our market share against all the other quick-service restaurants in the industry. so we're going to continue to grow market share. the long-term guidance, you know, we hope to continue to be innovative and drive our auvs for years to come, jim, but you're right, i can't predict that far out. >> good, because i know you had a five-year plan and i felt you were too conservative.
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look, you could do those numbers, but the possibility of new -- of the campaigns that you have could bring in customers. now, canada, korea, turkey. let's -- trying to figure out the commonality there. what are people fascinated about in turkey and korea that they wouldn't be in china or fascinated about in let's say russia or india. how many other countries does your concept work in? >> our concept really travels well all around the globe because all around the globe people love chicken, they love seafood, they love spicy food. we haven't found a market yet that doesn't fall in love with popeye's food. right now we're solidifying the countries we compete in, making sure they're strong brands, strong growth, strong new-store openings and those will be the model markets off of which we launch into new countries like last year we launched into lima, peru, and are off to a wonderful start.
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>> lima, peru, what would they know about this kind -- i know peru's supposed to have a great cuisine, what would they know about this kind of food? >> one, the peruvians just plain love food and they love spicy foods. they have welcomed our concept with open arms and we have four restaurants open so far and they're off and raging and good sales. and we have a business partner there that's been in the restaurant industry for years and is really very successful in many concepts. we're excited about latin america. >> one day am i going to see a lot of popeye's in china? >> yes, one day you'll see popeye's in every country around the globe, jim. >> look, i'm a believer, i couldn't understand why the stock was down. you are the best-performing stock in the restaurant universe. congratulations. >> thank you. you don't get stocks at a discount that blow away the numbers. you got one today because only a couple of analysts follow this other than "mad money" and
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sheryl bachelder delivered again.
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the ratio of reality to fiction in the market got some real outliers yesterday. the post earnings conference calls from jc penney and groupon. these calls after some not so hot quarters to say the least had the least grounding with how things are really unfolding at the companies that i've heard so far in 2013. groupon is amazing. there was no sense at all on that call that things are slowing and international is
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a real achilles heel. you don't bury a guide down. your credibility is shot the moment you don't bring up the mistakes and problems and say how you will address them at the top, you are just off the rails when you say a terrible quarter is a great one and a hideous outlook bodes well for the future. it was a real head-scratcher. it was so bad, i wasn't surprised, not one bit surprised when groupon out and fired inept ceot andrew mason after the close today. talk about a "closing bell." sure enough the stock popped off the bell because that's what happens when you get rid of a delusional chief executive. at jc penney, instead of explaining how it can survive with down 30% same-store sales. as michael epstein from credit suisse said, this was a beyond worst-case scenario quarterly result. i think that the salient issue is not whether the turn is working but how it can still work and why it's not having an impact on the comp store numbers
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at all. i tire of hearing how this product line or that product line can make a difference, and instead i want to know how the company could turn off so many of the traditional customers and why they don't seem to care about the new assortments at all. if johnson wants to succeed at this point, he's got to change the name of the enterprise, yes, scrap the name jc penney, i'm not kidding. first, the old customers seem to have turned against penney, so you've lost them already. the new clothes and soon to arrive home goods are dead on arrival because they are sold at jc penney, a place where people seem to know instinctively not to shop at. for example, if you buy one of those new selections from joe fresh, a very attractive line of clothes at jc penney, and someone compliments you and asks you, hey, where did you get that dress? and you tell them i got it at jc penney, that person will say, oh, they won't think of going because who shops at jc penney? you change the name, maybe people will be confused and actually go. penney is in the same position
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as gm against toyota and honda a few years ago. they thought they could reinvent and lose the older customers or just stay the way it was, keep that old customer base and let the japanese have the newer consumers. in reality, that was a false dichotomy and gm didn't need to side with one generation or another, just needed to be creative and satisfy both. johnson is satisfying nobody, i think. and that's why it's probably time for someone else to try before it's too late. because i have never seen any company come back from down 30% plus comps. he has to come up with a plan to address the problem and explain why the company is still viable before he talks about how he's succeeding when he isn't. i love managements who start with okay, numbers bad, here's the numbers, wow, are they awful, we're going to fix it. i do not like managements to start out talking about how good the numbers are when we all know they're terrible and proceed to tell you how things will get better and better when they're actually getting worse and worse. those are the managers of stocks i want to sell. those are the managements who need to be replaced because they don't get it and probably never
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will, like groupon just replaced its loser ceo who i had prepped to be added, candidly, to the wall of shame tonight. but he was spared that ignominious distinction by his firing. but you know what? you know who isn't spared? the jc penney ceo. and that's why ron johnson is joining the "mad money" wall of shame because he has got to go. ron, either stop being so darn delusional or better yet, just stop the charade. spend the time with the family in california. let somebody else take over, which would, of course, as with all wall of shame entrants, send jcp stock higher. stay with cramer.
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